Hotel Industry Groups Sue Los Angeles Over Minimum Wage Law

LOS ANGELES—Two national hotel-industry groups are suing the city of Los Angeles, arguing a recent minimum-wage increase for hospitality workers unfairly targets the lodging business and runs afoul of federal labor law.

The suit, filed in federal court here Tuesday by the American Hotel & Lodging Association and the Asian American Hotel Owners Association, takes aim at the city’s new Hotel Workers Act, which raises the hourly minimum wage for large-hotel workers in Los Angeles to $15.37. City Council passed the ordinance this fall and it is slated to take effect in July for hotels with more than 300 rooms. Hotels with at least 150 rooms will have another year to comply.

But the industry groups said their lawsuit wasn’t about the wage increase, but about a provision of the act that allows any part of the law to be waived at hotels covered by a collective-bargaining agreement. The industry groups believe the law allows unions to potentially pressure nonunionized hotels to organize. The suit also argues that the ordinance violates state and federal equal-protection clauses by unfairly targeting a single industry.

“This lawsuit is about the fact that the city of Los Angeles took an action that disrupts established labor law,” said Katherine Lugar, chief executive of AH&LA, at a Tuesday news conference. “Changing the fundamental ground rules in any one city will have real national implications.”

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The industry groups are asking the court to declare the law in violation of state and federal laws and enjoin its enforcement.

A spokesman for the Los Angeles city attorney said the office hadn’t yet reviewed the lawsuit, but added in an email, “We are confident that the ordinance is lawful and valid.”

The local hotel workers union, Unite Here Local 11, backed the measure. Unite Here Secretary-Treasurer Ada Briceno said in an emailed statement Tuesday that “hospitality is LA’s biggest low-wage industry, with the most working poor. L.A. City Council took a powerful step toward improving Angelenos’ lives.”

Minimum-wage increases have been passed by cities across the U.S., including in San Francisco, Seattle and Chicago, and some have been challenged in court. The International Franchise Association, for example, filed suit against Seattle in June after its City Council approved a gradual increase to $15 an hour.

Seattle’s law allows businesses with fewer than 500 employees to phase in the mandate more slowly than larger employers. But it counts a franchise operation, such as a fast-food restaurant, as a large employer if the brand employs more than 500 workers anywhere in the country. The suit is pending in U.S. District Court in Seattle.

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Hotel workers cheer after a city council vote to increase minimum wage in Los Angeles in September. REUTERS

The Los Angeles ordinance is one of very few that apply specifically to hotel workers. A previous unsuccessful challenge to similar law for hospitality workers near Los Angeles International Airport came in state court, not federal. The federal court could find that any different treatment of union and nonunion employers violates federal labor laws, said Paul DeCamp, an attorney at Jackson Lewis PC and former Labor Department official in the George W. Bush administration.

“A City Council can’t pass a law that interferes with federal labor policy,” said Mr. DeCamp, who isn’t connected to the suit.

Randy Renick, a Pasadena employment-law attorney who has represented workers at airport hotels but who isn’t involved in the latest suit, said state courts in California have upheld other local minimum-wage measures. “I don’t know of any circumstance where a court struck down a similar city-wage law,” Mr. Renick said.

James Elmendorf, a leader in the worker campaign to raise wages in Los Angeles, said hotel employees are confident that the courts will uphold the latest statute.

“Instead of wasting money on a suit, hotels should be spending money on paying their workers,” he said. Ten years ago, L.A. hotels were paying 37% of their room revenue in wages and compensation, he said, but by 2013 they were paying 31%.

Sandra Diaz, 30 years old, works 25 to 30 hours a week as a busser at the Daily Grill, a nonunionized restaurant inside the Westin LAX, where she isn’t subject to the airport district minimum-wage requirement. As a result of the new law, she will make an additional $3 an hour on top of the $12.28 she now earns.

Ms. Diaz said that because of the wage requirement, she will have “fewer worries” such as housing expenses and other costs to support her family.

Raymond Martz, chief financial officer of hotel owner Pebblebrook Hotel Trust , said he thinks the legislation would have a broadly detrimental effect on the Los Angeles hotel industry. Making hotels in the city less competitive with neighboring markets could, in turn, hurt employment and “reduce the value of existing hotels,” he said, adding the law would affect two of his Los Angeles properties.